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Issue Date: July 2007

Technology used to improve productivity and to provide benefits for public sector

12 July 2007

The image of the public sector as slow to innovate is rapidly becoming a thing of the past as governments are using advanced technology to consolidate back-office functions. This is according to the recent Shared Services in Government 2: Building a Platform for Better Public Services at Lower Cost study, sponsored by Cisco and independently conducted by A.T. Kearney.
The study highlights the major service improvements and cost reductions that are a result of 'shared services' and shows that when shared services are employed, agencies across government organisations can share access to functions such as finance or IT instead of having to gather information from and work with separate departments.
The report, which looks at nine countries,  suggests that government organisations that have embraced shared services may be close to getting their share of the windfall, although there are clear differences in the extent to which benefits are passed on to citizens.
In seven of the nine geographies studied - Australia, Austria, Germany, the Netherlands, New Zealand, the United Kingdom and the United States - the primary focus of shared services initiatives is to cut costs, reduce the burden on taxpayers and balance government accounts. In Canada, however, there is an additional focus on improving citizen services, which A.T. Kearney has identified as a best practice.  
Based on data from the Gershon Report in the United Kingdom and statistics from the Australian National Office for the Information Economy, Cisco estimates that the total government savings from the use of shared services could amount to USD$3,3 trillion worldwide over 10 years1 — equal to the amount spent annually on healthcare worldwide in 20052 or the estimated cost of the United States’ entire  federal budget for 20083
“Responding to the economic effects of globalisation and growing demands for service delivery from citizens are issues that continually face South Africa and other developing countries,” says Aggrey Rantloane, public sector regional sales manager at Cisco.
“Cisco sponsored this research as a way of validating the effectiveness of IT in the public sector. The necessity of shared service processes in the public sector, as highlighted by the research, also emphasises IT’s ability to reduce cost and allow governments to re-invent themselves,” says Rantloane.
“In previous research on shared services in government, we have noted the case for change and the historic opportunity facing the public sector,” says Ian Morton, principal consultant and project leader at A.T. Kearney. “We have now found that although cost reduction remains the most significant factor leading government organisations to combine and share back- and front-office functions, improving services to citizens is becoming increasingly important, with Canada taking a lead in many facets of transformation. In addition, the business case is much better than previously thought, with benefits being targeted in the 15 to 25% range.”
The independent A.T. Kearney research, which follows a similar study carried out in 2005, involved 25 in-depth interviews with chief executives, chief information officers and programme directors. The 2007 study highlights good and bad practices and offers advice and frameworks to improve the implementation of shared services initiatives. The report concludes that while the major cost benefit to government is headcount reduction, the second most important contribution is from IT contract and service consolidation.
“It is clear that technology is both a crucial enabler of and major target for shared services initiatives as one of the more interesting findings in the study relates back to the mismatch between IT strategies and the real demands of the citizen,” says Rantloane.
The study shows that shared services will help lead to improved communications, greater collaboration and increased productivity.
“Targeting these areas will be important to governments when they face financial pressures and increased legislation to improve services to citizens,” concludes Rantloane.
Appendix
1.        Reference: IBSG presentation on Government Productivity Lags, provided by Carolyn Purcell.
3.        Reference: http://www.fcnl.org/budget
 


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